Nomura's Steve Ashley is one of the good guys. When we wrote a profile of him five years ago, no one had a bad word to say. The then newly-promoted global head of markets at Nomura was seen as, "very down to earth," a "nice guy", and, "one of the best guys," people had ever worked for.
If you're going to unexpectedly and brutally lose your job in equities along with 500 of your colleagues, who better to wield the axe, therefore, than Ashley and his sidekick Jonathan Lewis? When they closed Nomura's European equities division almost overnight in April 2016, the two men tell the Financial Times they tried to be pleasant. It was all over very quickly: "“We’d done the very large majority of our cost cutting, about 80-85%, a month after we announced Project Spring [the name of the cost cutting initiative],” Ashley says. “We did let people go back to their desks. We did let people say goodbye to each other. We didn’t let people mill around for a few days,” says Lewis.
It's the kind of thing that might give other banks ideas, particularly as Nomura says closing the whole of its equities franchise didn't really affect the rest of its business. "If you talk to some of our best [investment] bankers, whatever sector specialism they’re in they don’t feel that it has cost them at all,” says Lewis, adding that there was an unfounded fear that cutting conversation-starters like equity research might detract from bankers' ability to schmooze clients.
Instead, lopping off the sub-scale European equities limb simply rendered Nomura's international investment bank profitable again. Costs fell by 18% and the $10bn loss made by Nomura's international business since the turn of the millennium was staunched as $1bn in costs disappeared. Profitable, Nomura is eyeing up (another) investment banking expansion, particularly in the U.S., where it sees European banks retreating and an opportunity for an "Asia-centric bank". Never have mass redundancies been more purgative.
Separately, Goldman Sachs could yet take a leaf from Nomura's book. Having long insisted that its strength in fixed income is derived from serving all clients in all markets at all stages of the cycle, Goldman is reportedly having second thoughts. Bloomberg reports that the bank's commodities division was "one of the topics of discussion" at a board meeting earlier this month. While banks like Morgan Stanley, J.P. Morgan, Barclays and Deutsche have pulled out of commodities already, Goldman had been insistent that the business would bounce back when the cycle turned. However, Goldman's commodities division had a bad start to the year and the bank is seemingly questioning its viability. Nomura shows what can be done with a bit of resolve.
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“These meetings were like no other senior management meeting I had attended in all my years of investment banking experience. It was effectively a lock-in with alcohol continuing to be served well beyond closing hours and fish and chips or kebabs being provided throughout the evening...After approximately 12 pints and chasers..Mr Ashley then vomited into the fireplace in the centre of the bar, to huge applause from his senior management team.” (The Times)